How Separate Property Can Become Marital Property

Transmutation is a term used in family law to describe property that has been transformed from a party’s separate property into marital property.
In the context of equitable distribution, the term “separate property” refers to property that is owned by one spouse individually. A spouse’s separate property includes all property he or she owned prior to the marriage, acquired by gift from a third-party during the marriage, or received by inheritance. Separate property is excluded from equitable distribution and is not subject to division between the parties. However, certain actions on the part of the owner of the separate property can occur that “transmute” the property into marital property or cause the property to become “mixed property,” property that has both marital and separate property components.

Transmutation of real property can occur when one party owns real property prior to marriage and, during the marriage that party transfers title to the property into the joint names of the parties as tenants by the entireties. Under North Carolina’s equitable distribution laws, there is a presumption that all real property titled as tenants by the entireties that is acquired during the marriage and before the date of separation is marital property. Therefore, there is a presumption that the party who owned the property prior to the marriage made a gift of his/her separate property to the marital estate by transferring title into the parties’ joint names. A party may be able to rebut this gift presumption if there is sufficient evidence that can be presented.

Commingling, or mixing separate property with marital property, is another way that separate property can be converted to marital property. For example, depositing funds that are separate property into an account that is held jointly with your spouse would not necessarily transmute those funds into marital property. However, transmutation can occur if the party claiming all or a portion of the funds that exist in the account at the date of separation are separate property, but the party is unable to trace those funds to the initial deposit of his or her separate monies.

Tracing separate property to its origin or the date it was received can be a challenging and time-consuming process that may require obtaining and examining financial records and other documents that date back many years, sometimes to the date of marriage. If separate property claims or transmutation are at issue in your case, the family law attorneys at GHMA | LAW can help you protect property rights to which you are rightfully entitled. Our family law attorneys are experienced in all aspects of equitable distribution, including those cases that involve high net worth, tracing of separate property, and complex legal issues.